US consumer delinquencies jump to highest in almost a decade
The jobless rate for workers 16 to 24 years old stood at 10.4% in December
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[HOUSTON] Delinquency rates on loans ranging from mortgages to credit cards rose to 4.8 per cent of all outstanding US household debt in the fourth quarter, the highest level since 2017, driven by higher defaults among low-income and young borrowers.
While the overall share of loans in some stage of default is near pre-pandemic averages, the rise in delinquencies among the lowest earners adds to evidence of an increasingly bifurcated economy, data from the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit released on Tuesday (Feb 10) showed.
The rise in defaults was driven by delinquencies in mortgage payments, and New York Fed researchers found that they were particularly high in lower income zip codes. Student-loan delinquencies, which have surged following a pause in payment requirements during the pandemic, also contributed to the rise in defaults, the researchers said.
“As household debt levels grow modestly, mortgage delinquencies continue to increase,” said Wilbert van der Klaauw, an economic research advisor at the New York Fed, in a press release accompanying the figures. “Delinquency rates for mortgages are near historically normal levels, but the deterioration is concentrated in lower-income areas and in areas with declining home prices.”
Overall household debt balances climbed 1 per cent from the previous quarter to US$18.8 trillion, the report showed. The share of credit-card loans that were at least 90 days delinquent rose to 12.7 per cent, the most since the first quarter of 2011, and the share of auto loans in serious delinquency climbed to 5.2 per cent, just shy of the record reached in 2010.
The increased struggle in low-income and young borrowers’ ability to pay their loans is consistent with elevated unemployment rates among some parts of the population, they added. The jobless rate for workers 16 to 24 years old stood at 10.4 per cent in December, near the highest levels since the depths of the pandemic in 2021.
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Some 16.3 per cent of student-loan debt became delinquent in the fourth quarter, the biggest increase on record in data going back to 2004. BLOOMBERG
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